The maker of potash and phosphate fertilizer had this to say:
Despite confidence in the long-term drivers of our business, a significant portion of fertilizer demand comes from developing markets where growth has been less robust than expected. This sluggish environment has been most visible in our potash and phosphate businesses, and has contributed to challenging market conditions. As a consequence, we must make some difficult decisions today to ensure the company continues to be well positioned for the future.
The company plans to suspend production at one Canadian potash plant, reduce production at another and shut down a plant in New Brunswick at the end of the first quarter of next year. Potash Corp. expects that remaining capacity plus existing inventory will allow it to supply 10 million tons of potash in 2014.
In the third quarter of this year, Potash Corp.’s gross profit on potash fertilizer fell from $554 million in the third quarter of 2012 to $228 million. Price per metric ton fell from $429 a year ago to $307. Potash production in the third quarter was down 27% to 1.2 million metric tons. Sales volumes fell by nearly 500,000 metric tons year over year.
The past summer’s break-up of the Russian-Belarus cartel Belarusian Potash Company has sent the fertilizer market into a tailspin. The Russian firm Uralkali left the cartel and announced that it would go after market share leading potash buyers to sit on their wallets as they wait for prices to fall. That uncertainty killed both sales volumes and margins for Potash Corp. and the Canadian cartel known as Canpotex, made up of Potash Corp., Agrium Inc. (NYSE: AGU) and Mosaic Co. (NYSE: MOS).
Potash Corp. will also close a chemical plant in Florida and reduce operations at U.S. and Trinidad nitrogen facilities.
The company expects one-time costs of around $70 million from the firings and will take the charges in the fourth quarter of the 2013 fiscal year.
Shares were trading up about 0.4% in Tuesday’s premarket, at $31.84 in a 52-week range of $28.55 to $44.13.
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